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Profit warnings down in 2013

THE number of companies warning of lower than expected profits fell to a three-year low in 2013 despite a surge in downgrades at the end of the year.

The report by the accountancy firm EY said UK quoted companies issued 255 warnings in 2013, compared to 287 in 2012, but the final quarter saw a figure of 73, a rise of 30 per cent on the previous quarter.

EY said recent optimism had been jolted by global growth anxieties in the late summer, causing downgrades to spill into the final quarter.

The new year has started with a faster pace of alerts than in 2013, with the added complication of a stronger pound in anticipation of higher interest rates.

The sectors with the highest number of profit warnings in the final quarter were support services, with 14, software and computer services with seven and aerospace and defence and media and technology, with five.

Dampened expectations meant the retail sector issued just two profit warnings in the final quarter of 2013, including Debenhams on New Year's Eve.

Keith McGregor of EY said: "The 30 per cent quarterly rise in UK profit warnings in the final quarter of last year seems incongruous next to improving economic data, but global growth anxieties reduced profit expectations in late summer, with earnings downgrades continuing into the final quarter of 2013

"An improving economic outlook should see profit warnings fall in 2014, although perhaps by less than the pace of recovery might suggest."